The perfect storm of inflationary pressures, aggressive monetary tightening from central banks, combined with a deepening of the Russia/Ukraine crisis, has made capital raising via traditional bond markets particularly expensive for African countries whose governments have been forced to find innovative ways to raise capital.
But now sentiment has turned; in a risk-off environment investors generally prefer to buy investment grade credits, and inflationary pressures mean that for investors, there are many opportunities which are perceived as lower risk and which now offer higher yields. This decoupling of bond and loan markets has paved the way for alternative, attractively priced funding sources. Liquidity in the loan markets is very strong.
Most recently, we have seen a growing trend for deals with some form of credit risk mitigation embedded into the loan upfront. This can be in the form of embedded credit risk insurance, or Export Credit Agency and Development Finance Institution guarantees.